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Non-GAAP Measures: A Roadmap for Audit Committees

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Mar 16, 2018

On March 16, 2018, the Center for Audit Quality (CAQ) released a new publication designed to help audit committees enhance their oversight of non-GAAP measures used by company management.

Presenting themes that emerged at a series of multi-stakeholder roundtables, Non-GAAP Measures: A Roadmap for Audit Committees provides a set of key considerations for audit committees, including leading practices to assess whether a company’s non-GAAP metrics present a balanced representation of the company’s performance. GAAP information serves as a foundation for confidence in financial statements, but financial statement users also value non-GAAP financial measures, when presented appropriately.

In addition to the roadmap, the CAQ released a companion video featuring interviews with audit committee chairs that provides additional context and real-life examples of how audit committees are thinking about and overseeing non-GAAP measures.

Among other recommendations, the CAQ suggests that the audit committee:

  • Put itself in the shoes of investors when evaluating if the non-GAAP measures and related disclosures presented align with the company’s overall strategy and performance.
  • Ask management whether it has an internal policy that provides guidelines for determining how non-GAAP measures are generated, calculated, and presented.
  • Discuss with management how the company makes changes to the non-GAAP measures it presents and the rationale for why it would or would not make changes.
  • Ask the company to compare or benchmark its non-GAAP measures to its peers.
  • Leverage external auditors as a resource when evaluating non-GAAP measures.

Review the publication on the CAQ's website.

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